UPDATE: Feb. 5, 2019: The American Hospital Association pushed back on the Health Affairs findings in a statement Tuesday afternoon, saying the authors “use limited data to draw broad conclusions.” AHA President Tom Nickels noted that the study uses data from employer-sponsored plans and doesn’t include Medicare, Medicaid or Blue Cross Blue Shield claims. Also, hospitals have expenses doctors don’t, such as administrative expenses, regulatory compliance, drugs and medical devices, he said. “We recommend in the future that such studies take into account all these factors,” Nickels said.

Dive Brief:

Hospital prices for inpatient care grew 42% from 2007 to 2014, substantially faster than the 18% growth in physician prices over the same time period, according to a new report published in Health Affairs.

Researchers found a similar trend for outpatient settings, with hospital-based care growing at 25% compared to physician prices rising 6%.

The findings suggest that policy measures aimed at cutting healthcare costs should focus on issues like antitrust enforcement, incentivizing more cost-efficient physician referrals and reference pricing, the report authors said.

Dive Insight:

The report comes amid a wave of M&A with providers seeking to buttress headwinds like falling inpatient admissions. Last week, Dignity Health and Catholic Health Initiatives finalized their merger creating the largest nonprofit health system by revenue at nearly $30 billion.

At the same time, HCA Healthcare said it had closed its purchase of North Carolina-based Mission Health for $1.5 billion.

Those agreements follow the marriages of Advocate Health Care and Aurora Health Care, which combined 27 hospitals and about 3,300 physicians, and Bon Secours Health System and Mercy Health, which merged to create a system with more than 40 hospitals across seven states and revenue of about $8 billion.

In the first half of 2018, healthcare M&A activity surpassed $315 billion, nearly doubling the amount from the first half of 2017, according to Thomson Reuters. Deloitte has even predicted that current merger trends would result in only half of the current health systems remaining in the next 10 years.

Beside those horizontal transactions are the vertical megadeals like CVS-Aetna and payer combinations such as Cigna-Express Scripts.

The Health Affairs authors suggested more vigorous review of mergers at the state and federal levels, as well as regulating hospital payments or instituting reference pricing.

“Our work suggests that instead of focusing on growth of physician prices (which have grown roughly at the pace of inflation), in the short run policy makers should devote more of their efforts to addressing growth of hospital prices,” they wrote.

And while states are putting greater scrutiny on provider mergers in their areas, lack of competition and the effect that can have on prices persists. In a recent report, the Center for American Progress argued that M&A has restricted patient choice instead of cutting costs.

“The current state of healthcare provider markets demands stronger enforcement by federal and state antitrust authorities, policies to support more robust competition among providers, and limits on prices in already concentrated markets,” the group wrote. “Any efforts to control healthcare costs and improve care for patients should consider the growing role of market power.”

Some studies back that up. A report from the University of California-Berkeley found an association between highly concentrated markets in the state and higher hospital and physician prices. The northern part of the state had 30% higher costs than the southern part. That led to legislation to roll out a pricing database by 2023, and the state’s attorney general to file a lawsuit against Sutter Health charging anti-competitive practices.